Dealers said that weakness of the dollar against other global currencies coupled with bunched up dollar inflows triggered a sell-off resulting in the rupees rally.
The Yen soared to its highest in two-and-a-half years against the dollar to 111.60 on speculation that Japan may stop trying to hold down the Yen after the weekend G7 call for flexible currency regimes.
The rupee has appreciated by Rs 1.71 (3.73 per cent) in the current fiscal year, while it posted a gain of Rs 2.22 (4.63 per cent) since January 1. It hit a life-low of 49.08 on May 16, 2002 on persistent India-pak border tension, but has risen by Rs 3.33 (6.7 per cent%) since then.
Exporters, who held up their dollar supplies in the previous weekon hopes of further fall of the rupee ahead of the Resurgent India Bond redemption sold dollars heavily after the rupee rose sharply.
Meanwhile, in the government securities (G-Sec) market, trades were active and choppy. Select bonds ended with gains of 10-15 paise. State-run banks, were seen booking profits ahead of the half-yearly closing of accounts. Dealers pressed sales on a slight squeeze in liquidity. The widely traded 8.07 per cent 2017 ended higher at Rs 122.55; the 7.46 per cent 2017 closed at Rs 117.29/32; and the 6.05 per cent 2019 rose to Rs 102.72.
Call rates finished higher at around 4.60-4.70 per cent after opening at 4.40-4.50 per cent. There was increased demand in the early part of the fortnightly reporting cycle. There was some pressure on liquidity due to advance-tax outflows, but there was adequate liquidity in the system, a dealer said. This was reflected in the outgo at the Reserve Bank of India (RBI) repos auctions. The central bank accepted all 24 bids for Rs 20,005 crore at its one-day repos auction. At the fortnightly repos (14-day) auction, the RBI accepted four bids for Rs 1,195 crore.